An economy is described by the following equations:

C = 10 + 0.7(Y-T)

I^p = 80

G = 104

NX = 15

T = 170

Y* = 600

1. Find a numerical equation linking planned aggregate expenditure to output.
2. Find autonomous expenditure and induced expenditure in this economy.
3. Find the value of a short-run equilibrium output and construct a Keynesian-cross diagram.
4. Find the effect on short-run equilibrium output of a decrease in government purchases from 104 to 89.
5. Find the effect on short-run equilibrium output of an increase in tax collections from 170 to 200 (Leave everything else in the original state).
6. Find the effect on short-run equilibrium output of a decrease in planned investment spending from 80 to 71 (Leave everything else in the original state).

Hints:

• Y is not equal to Y*.
• 1. Calculate it twice to be sure you get the same answer, if you don't, calculate again the 3rd time.
• 3. You may solve it mathematically or using the table method as described in the book.
• 4, 5, 6 -- I am looking for the numerical value of Y in each case.